Pot players stake out their weed patch

By Tim Boreham

March 2, 2019 — 12.00am

A land grab is emerging in the recently-legalised Australian medical cannabis sector, as holders of newly-minted cultivation and processing licences seek out sites that offer the best growing conditions and involve the least regulatory hurdles.

A number of urban and regional facilities are already underway or in advanced planning stages, despite intransigent council attitudes and stringent regulatory requirements that also make it difficult for patients to access medical marijuana.

“This is not so much a land grab as a green rush,” said Trevor Schoerie, managing director of the consultancy PharmOut.

The Office of Drug Control has granted 46 licences for cannabis cultivation.

Established hemp grower Nunyara Pty Ltd this month paid $2.6 million for a “unique” 20-hectare lot in the Northern Rivers district of NSW. The company has also lodged a development application for a 5000 square metre "state of the art” growing and cultivation facility secured within a two hectare lot.

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The biggest ASX listed ‘pot play’, Cann Group is spending $100 million on a 37,000 sq m growing facility near Melbourne’s Tullamarine Airport, on a five hectare site leased from the Australian Pacific Airports Corporation.

APAC is financing and managing the core buildings, designed and built by the greenhouse consultancy Aurora Larssen Projects.

The “farm to pharma” player Althea Group has entered a 30-year lease for a four hectare site at Skye in Melbourne’s south east, where it plans to spend $11 million on a growing and extracting facility producing an initial 3000 kilograms a year.

In Wonthaggi, the local arm of Canada’s MediPharm Labs is planning a $3 million facility in the heart of the dairying town.

The 1000 sq m complex will process material from contract growers, converting 150 tonnes of raw cannabis annually into 15 tonnes of oils for use in medicines.

“Because cannabis carries a stigma, everyone wants the facilities to be out of sight and out of mind,” says MediPharm managing director Warren Everitt.

“With our business everyone knows what we’re doing, which opens a can of worms in terms of setting up the business.”

Mr Everitt said while there was abundant farmland suitable for growing cannabis, the site was a rare example of industrial zoned land in a regional town.

“We are a manufacturing company first and foremost,” he said. “Just like Carlton and United Breweries doesn’t grow the hops at a factory, we will source the cannabis from a network of growers.”

As of late January, the federal Office of Drug Control had granted 46 licences for cannabis cultivation and/or manufacturing.

Mr Schoerie said southern Australia’s greenhouse-based operators were driven not so much by the cost of land, but access to clean water and reliable power.

“The dirty little secret of the green rush is that it ain’t that green, because there’s a massive consumption of electricity,” he said.

He said licensees may struggle to locate sites that enable the crops to be transported securely and efficiently.

“Because cannabis a valuable crop, it’s a poor return on investment to have it struck in a warehouse.”

THC Global chief executive Ken Charteris said many licence holders would struggle to win actual permits to run their facilities, with land being a minor investment relative to fencing and security requirements.

Would-be growers were also likely to be hampered by lack of access to an approved extraction facility. “Unless you have a permitted site to take it, you will have to destroy your crop,” he said.

The THC Group claims a head start, having acquired a fit-for-purpose refining plant at Southport on the Gold Coast.

Now valued at $35 million-plus, THC picked up the facility for a bargain $2.5 million after Danish-based owner LEO Pharma deemed it surplus to its local needs.

Mr Schoerie said standard town planning rules prohibited pharmaceutical facilities from being one kilometre within a residential area. But surprisingly, there are no planning restrictions on cannabis facilities being next door to a school.

“Councils have various idiosyncrasies, but until you have worked through these jurisdictions you won’t know what they are,” he said.

At Wonthaggi, MediPharm is learning the hard way with the Bass Coast council demanding the company letterbox its intentions to thousands of households within a one-kilometre radius. “You only need four of them to object,” Mr Everitt said. “We are months behind because of the red tape that gets rolled out for us.”

Despite the hurdles, global cannabis research consultancy Prohibition Partners forecasts medical cannabis to be a $1.2 billion industry in 2024, rising to $3 billion by 2028.